2025 Q2 M&A and Small Business Market Report

In this update, we are breaking down what we saw in the M&A and small business market in Q1 2025- and what it means going forward.

The Big Picture (Source: BizBuySell Q1 2025 Insight Report)

Despite macroeconomic shifts- new tariffs, changing interest rates, and evolving regulations- the market for selling a small business remains resilient. If you have a solid, well-run business, there is still strong demand. However, we are noticing that:

  • Buyers are more cautious

  • Deals are taking longer to close

This past quarter, 2,368 businesses changed hands, totaling over $2 billion in business sales- a 9% increase from the same quarter last year. The median sale price rose 4% to $349,000, but the median time to close has lengthened from 172 to 198 days.

What this tells us: Deals are still happening, but buyers are asking more questions and taking their time.

Tariffs Are Shaking Things Up (Sources: BizEquity Part Two 2025 Market Outlook and Axial Tariff Impact Report)

The rollout of new tariffs on goods from Canada, Mexico, China, and other countries is having a ripple effect. Here’s what the data shows:

  • 40% of businesses anticipate significant cost increases.

  • 80% are revising financial forecasts.

  • 67% are actively cutting costs to adapt.

At the present time, service-based companies are the clear short-term winners. Manufacturers, particularly those dependent on imported components, are under more pressure. Some owners in this sector are choosing to hold off listing or are taking their business off the market entirely.

That said, the general tone is not one of panic. Many deals are still moving forward. There’s a sense that the uncertainty may actually motivate more sellers to act now.

Buyers, however, are asking more detailed questions, and lenders are tightening up, especially with first-time buyers. PE funds and fully funded buyer groups are being prioritized.

Industry Highlights (Source: Axial Q1 2025 SMB M&A Pipeline)

Some sectors are thriving despite the macro headwinds:

  • Healthcare M&A activity is up 75% year-over-year.

  • Business Services grew nearly 30%.

  • Industrials and Consumer Goods posted double-digit growth.

  • Technology is attracting attention, although supply is limited.

Food & Hospitality? There's high supply, but buyers are cautious- rising costs and softer consumer spending are impacting deal terms.

Manufacturing: A Mixed Bag (Source: BizBuySell Q1 2025 Insight Report)

If you’re in domestic manufacturing, you're in a strong position:

  • Median sale prices jumped 54% to over $1 million.

  • Revenue and cash flow are trending upward.

  • Tariffs have made domestic suppliers more attractive, and buyers are willing to pay a premium.

But if you're reliant on foreign parts, be ready for tougher scrutiny. If you're a seller in this space, I recommend presenting multiple financial scenarios to help buyers understand tariff-related risk.

What Buyers Want (Source: BizBuySell Q1 2025 Insight Report)

  • We’re seeing more corporate refugees—people leaving the corporate world for business ownership.

  • Buyers want clean books, stable profitability, and owner-independent operations.

  • They’re especially drawn to recession-proof, tariff-proof businesses.

Final Thoughts

Even with tariffs, longer deal cycles, and tighter lending, we’re still in a seller’s market for well-positioned businesses. If you’re in a sector unaffected by tariffs- or better yet, benefiting from them- you’re in great shape.

And if you're in manufacturing and still looking to sell, your best bet is to prepare thoroughly and communicate transparently with buyers.

Let’s talk if you’re thinking of selling or buying a business. The landscape is changing, but with the right approach, there are still plenty of opportunities.

Eric I. Mendelsohn- Business Broker